Highlands Bankshares, Inc. Reports Second Quarter 2019 Results
ABINGDON, Va., Aug. 12, 2019 /PRNewswire/ -- Highlands Bankshares, Inc. (HLND) today reported net income of $571,000 or $0.06 per diluted share for the quarter ended June 30, 2019, compared to $1.1 million or $0.10 per diluted share, for the quarter ended March 31, 2019, and net income of $923,000, or $0.09 per diluted share, for the quarter ended June 30, 2018. The annualized return on average assets and return on average equity for the second quarter of 2019 were 0.37 percent and 3.89 percent respectively.
"Second quarter 2019 was significantly impacted by our continued focus on asset quality," reported Bryan Booher, Interim President and Chief Executive Officer. "We recorded $836,000 in provision for loan losses during the second quarter, primarily to replenish the allowance for credit losses following a $565,000 charge-off recorded on a single relationship after we completed foreclosure proceedings. While our efforts to resolve this large exposure were painful to second quarter net income, we removed a significant problem asset from our balance sheet."
"Aside from the credit-related items, our second quarter of 2019 was generally in line with the first quarter. Noninterest income improved slightly and noninterest expense declined when compared to the first quarter, while net interest income was flat," Booher continued. "Our sales efforts during the second quarter were successful, with the loan portfolio growing $9.4 million after two quarters of net shrinkage. Deposits have grown $15.6 million or 3.1 percent so far during 2019."
Consolidated net income for the six months ending June 30, 2019 totaled $1.6 million, compared to $1.5 million earned during the same period of 2018 as the benefit of lower noninterest expense was largely offset by higher provision for loan losses.
Revenue Growth
Second quarter 2019 total revenue (net interest income plus noninterest income) increased slightly to $6.0 million. Net interest income was $5.1 million in both the second and first quarters of 2019, as the favorable impact of loan growth offset a 9 basis point reduction in the net interest margin. Second quarter 2019 noninterest income totaled $933,000 compared to $890,000 in the first quarter of 2019 due higher BOLI and cardholder interchange income.
Noninterest Expense and Operating Efficiency
Noninterest expenses increased slightly over the first quarter of 2019, the net impact of lower personnel and occupancy expense, partially offset by higher legal and other professional fees. In the second quarter of 2019, the efficiency ratio was 75.36 percent, compared to 75.91 percent in the first quarter of 2019.
Asset Quality
The provision for credit losses for second quarter 2019 was $836,000, compared to $103,000 in first quarter 2019. Net charge-offs in the second quarter of 2019 totaled $689,000, or 0.62 percent annualized of average loans held for investment, compared to $380,000 or 0.34 percent annualized of loans held for investment for the first quarter of 2019.
Past due loans as a percentage of total loans held for investment were 1.26 percent at June 30, 2019, compared to 1.36 percent at March 31, 2019. As of June 30, 2019, loans greater than 90 days past due totaled $3.4 million, or 0.74 percent of loans held for investment, compared to 0.77 percent at March 31, 2019. Nonperforming assets were $8.3 million, or 1.83 percent of loans held for investment and OREO at June 30, 2019.
2Q19 |
1Q19 |
4Q18 |
3Q18 |
2Q18 |
|
Past due loans to end of period loans |
1.26% |
1.36% |
1.51% |
1.42% |
1.47% |
Past due loans 30-89 days to end of period loans |
0.52 |
0.58 |
0.70 |
0.83 |
0.62 |
Past due loans 90 plus days to end of period loans |
0.74 |
0.77 |
0.81 |
0.59 |
0.84 |
Nonperforming assets to loans and OREO |
1.83 |
1.86 |
1.81 |
1.49 |
1.38 |
Classified assets to tier 1 capital |
41 |
36 |
38 |
35 |
34 |
Allowance for credit losses to nonperforming loans |
79.64 |
77.49 |
73.88 |
93.29 |
106.90 |
As of June 30, 2019, the allowance for credit losses totaled $4.2 million, representing 0.96 percent of loans held for investment, and 79.64 percent of nonperforming loans.
Capital and Liquidity
At June 30, 2019, the Company's subsidiary bank, Highlands Union Bank, reported a tier 1 leverage ratio of 9.19 percent, tier 1 risk-based capital ratio of 12.89 percent, and total risk-based capital ratio of 13.87 percent
The Company's loans held for investment to deposit ratio was 87.1 percent and the loans held for investment to asset ratio was 73.8 percent at June 30, 2019. The Company maintained cash and investment securities totaling 19.1 percent of assets as of this date. The Company's funding mix is weighted heavily towards customer deposits, which funded 84.7 percent of assets at June 30, 2019.
About Highlands Bankshares, Inc.
Highlands provides a relationship-based and highly personal banking experience to small to mid-sized private businesses, professionals, and individuals. Focused on providing value to each and every customer, Highlands delivers banking services through highly skilled employees, digital channels, as well as 16 offices located in North Carolina, Eastern Tennessee, and Southwest Virginia.
Cautions Concerning Forward-Looking Statements
This news release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements relating to financial and operational performance and certain plans, expectations, goals and projections. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, these statements are inherently subject to numerous assumptions, risks and uncertainties, and there can be no assurances that actual results, performance or achievements will not differ materially from those set forth or implied in the forward-looking statements. For an explanation of the risks and uncertainties associated with forward-looking statements, see the Company's Annual Report on Form 10-K for the year ended December 31, 2018, and other filings with the Securities and Exchange Commission. All forward-looking statements included in this press release are based upon information available at the time of the release, and the Company assumes no obligation to update any forward-looking statement.
Quarterly Consolidated Income Statements (unaudited) |
||||||||||
Quarter ended |
Percent change compared to |
|||||||||
(thousands) |
June 30, 2019 |
March 31, 2019 |
June 30, 2018 |
Prior quarter |
Same quarter |
|||||
INTEREST INCOME |
||||||||||
Loans receivable and fees on loans |
$ 5,652 |
$ 5,653 |
$ 5,276 |
0.0% |
7.1% |
|||||
Investment securities |
433 |
412 |
438 |
5.1% |
-1.1% |
|||||
Federal funds sold and overnight investments |
227 |
141 |
57 |
61.0% |
298.2% |
|||||
Total interest income |
6,312 |
6,206 |
5,771 |
1.7% |
9.4% |
|||||
INTEREST EXPENSE |
||||||||||
Deposits |
955 |
824 |
463 |
15.9% |
106.3% |
|||||
Other borrowed funds |
275 |
273 |
323 |
0.7% |
-14.9% |
|||||
Total interest expense |
1,230 |
1,097 |
786 |
12.1% |
56.5% |
|||||
Net interest income |
5,082 |
5,109 |
4,985 |
-0.5% |
1.9% |
|||||
Provision for loan losses |
836 |
103 |
172 |
711.7% |
386.0% |
|||||
Net interest income after provision for loan losses |
4,246 |
5,006 |
4,813 |
-15.2% |
-11.8% |
|||||
NONINTEREST INCOME |
||||||||||
Service charges on deposit accounts |
338 |
342 |
342 |
-1.2% |
-1.2% |
|||||
Other service charges, commissions and fees |
378 |
339 |
428 |
11.5% |
-11.7% |
|||||
Mortgage banking income |
48 |
48 |
52 |
0.0% |
-7.7% |
|||||
Securities losses, net |
(7) |
- |
- |
|||||||
Other operating income |
176 |
161 |
167 |
9.3% |
5.4% |
|||||
Total noninterest income |
933 |
890 |
989 |
4.8% |
-5.7% |
|||||
NONINTEREST EXPENSE |
||||||||||
Salaries and employee benefits |
2,281 |
2,416 |
2,380 |
-5.6% |
-4.2% |
|||||
Occupancy and equipment expense |
527 |
615 |
750 |
-14.3% |
-29.7% |
|||||
OREO-related expenses |
92 |
50 |
146 |
84.0% |
-37.0% |
|||||
Other operating expense |
1,633 |
1,473 |
1,356 |
10.9% |
20.4% |
|||||
Total noninterest expense |
4,533 |
4,554 |
4,632 |
-0.5% |
-2.1% |
|||||
Income before income taxes |
646 |
1,342 |
1,170 |
-51.9% |
-44.8% |
|||||
Income tax expense |
75 |
282 |
247 |
-73.4% |
-69.6% |
|||||
Net income (loss) |
$ 571 |
$ 1,060 |
$ 923 |
-46.1% |
-38.1% |
|||||
Net income (loss) per common share: |
||||||||||
Basic |
$ 0.07 |
$ 0.13 |
$ 0.11 |
|||||||
Diluted |
0.06 |
0.10 |
0.09 |
|||||||
Consolidated Income Statements (unaudited) |
||||||
Year ended June 30, |
Percent change |
|||||
(thousands, except per share information) |
2019 |
2018 |
||||
INTEREST INCOME |
||||||
Loans receivable and fees on loans |
$ 11,305 |
$ 10,591 |
6.7% |
|||
Investment securities |
845 |
916 |
-7.8% |
|||
Federal funds sold |
368 |
127 |
189.8% |
|||
Total interest income |
12,518 |
11,634 |
7.6% |
|||
INTEREST EXPENSE |
||||||
Deposits |
1,779 |
926 |
92.1% |
|||
Other borrowed funds |
548 |
687 |
-20.2% |
|||
Total interest expense |
2,327 |
1,613 |
44.3% |
|||
Net interest income |
10,191 |
10,021 |
1.7% |
|||
Provision for loan losses |
939 |
344 |
173.0% |
|||
Net interest income after provision for loan losses |
9,252 |
9,677 |
-4.4% |
|||
NONINTEREST INCOME |
||||||
Service charges on deposit accounts |
680 |
679 |
0.1% |
|||
Other service charges, commissions and fees |
717 |
847 |
-15.3% |
|||
Mortgage banking income |
96 |
152 |
-36.8% |
|||
Securities losses, net |
(7) |
- |
- |
|||
Other operating income |
337 |
393 |
-14.2% |
|||
Total noninterest income |
1,823 |
2,071 |
-12.0% |
|||
NONINTEREST EXPENSE |
||||||
Salaries and employee benefits |
4,697 |
4,783 |
-1.8% |
|||
Occupancy and equipment expense |
1,142 |
1,481 |
-22.9% |
|||
OREO-related expenses |
142 |
277 |
-48.7% |
|||
Other operating expense |
3,106 |
3,257 |
-4.6% |
|||
Total noninterest expense |
9,087 |
9,798 |
-7.3% |
|||
Income (loss) before income taxes |
1,988 |
1,950 |
1.9% |
|||
Income tax expense (credit) |
357 |
417 |
-14.4% |
|||
Net income (loss) |
$ 1,631 |
$ 1,533 |
6.4% |
|||
Net income (loss) per common share: |
||||||
Basic |
$0.20 |
$0.19 |
||||
Diluted |
0.16 |
0.15 |
||||
Consolidated Balance Sheets (unaudited) |
||||||||||
Percent change since |
||||||||||
(thousands) |
June 30, 2019 |
December 31, 2018 |
June 30, 2018 |
Prior quarter |
Same quarter |
|||||
ASSETS |
||||||||||
Cash and due from banks |
$ 26,684 |
$ 19,965 |
$ 23,007 |
33.7% |
16.0% |
|||||
Federal funds sold |
21,138 |
10,101 |
963 |
109.3% |
2095.0% |
|||||
Total cash and cash equivalents |
47,822 |
30,066 |
23,970 |
59.1% |
99.5% |
|||||
Investment securities |
68,997 |
71,405 |
73,553 |
-3.4% |
-6.2% |
|||||
Loans held for sale |
863 |
265 |
1,424 |
225.7% |
-39.4% |
|||||
Loans held for investment |
451,590 |
448,121 |
441,460 |
0.8% |
2.3% |
|||||
Allowance for loan losses |
(4,243) |
(4,373) |
(4,138) |
-3.0% |
2.5% |
|||||
Net loans held for investment |
447,347 |
443,748 |
437,322 |
0.8% |
2.3% |
|||||
Premises and equipment, net |
17,159 |
17,447 |
17,879 |
-1.7% |
-4.0% |
|||||
Real estate held for sale |
590 |
817 |
992 |
-27.8% |
-40.5% |
|||||
Deferred tax assets |
5,706 |
6,526 |
7,152 |
-12.6% |
-20.2% |
|||||
Interest receivable |
2,010 |
1,617 |
1,728 |
24.3% |
16.3% |
|||||
Bank-owned life insurance |
15,215 |
15,022 |
14,835 |
1.3% |
2.6% |
|||||
Other real estate owned |
2,892 |
2,212 |
2,233 |
30.7% |
29.5% |
|||||
Other assets |
3,120 |
2,816 |
2,991 |
10.8% |
4.3% |
|||||
Total assets |
$ 611,721 |
$ 591,941 |
$ 584,079 |
3.3% |
4.7% |
|||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||||
LIABILITIES |
||||||||||
Deposits: |
||||||||||
Noninterest bearing |
$ 153,982 |
$ 156,408 |
$ 155,337 |
-1.6% |
-0.9% |
|||||
Interest bearing |
364,462 |
346,408 |
342,979 |
5.2% |
6.3% |
|||||
Total deposits |
518,444 |
502,816 |
498,316 |
3.1% |
4.0% |
|||||
Short-term borrowings |
30,000 |
30,000 |
- |
0.0% |
0.0% |
|||||
Long-term debt |
67 |
93 |
30,120 |
-28.0% |
-99.8% |
|||||
Other liabilities |
3,179 |
2,391 |
1,482 |
33.0% |
114.5% |
|||||
Total liabilities |
551,690 |
535,300 |
529,918 |
3.1% |
4.1% |
|||||
STOCKHOLDERS' EQUITY |
||||||||||
Common stock |
5,156 |
5,156 |
5,124 |
0.0% |
0.6% |
|||||
Preferred stock |
4,184 |
4,184 |
4,184 |
0.0% |
0.0% |
|||||
Additional paid-in capital |
19,292 |
19,277 |
19,224 |
0.1% |
0.4% |
|||||
Retained earnings |
31,762 |
30,131 |
28,072 |
5.4% |
13.1% |
|||||
Accumulated other comprehensive income |
(363) |
(2,107) |
(2,443) |
-82.8% |
-85.1% |
|||||
Total stockholders' equity |
60,031 |
56,641 |
54,161 |
6.0% |
10.8% |
|||||
Total liabilities and stockholders' equity |
$ 611,721 |
$ 591,941 |
$ 584,079 |
3.3% |
4.7% |
|||||
Profitability Ratios, Asset Quality and Capital (unaudited) |
|||||||
Quarter ended |
|||||||
(dollars in thousands) |
June 30, 2019 |
March 31, 2019 |
June 30, 2018 |
||||
Profitability Ratios (current quarter, annualized) |
|||||||
Net interest margin |
3.75% |
3.86% |
3.84% |
||||
Annualized return on average assets |
0.37 |
0.71 |
0.63 |
||||
Annualized return on average equity |
3.89 |
7.53 |
6.89 |
||||
Efficiency ratio |
75.36 |
75.91 |
77.54 |
||||
June 30, 2019 |
December 31, 2018 |
June 30, 2018 |
|||||
Asset Quality |
|||||||
Loans 90 days past due and still accruing |
$ 168 |
$ 107 |
$ - |
||||
Non-accrual loans |
5,265 |
5,920 |
3,871 |
||||
Total non-performing loans |
5,433 |
6,027 |
3,871 |
||||
Other real estate owned |
2,892 |
2,212 |
2,233 |
||||
Total non-performing assets |
$ 8,325 |
$ 8,239 |
$ 6,104 |
||||
Ratios: |
|||||||
Non-performing loans to loans held for investment |
1.20% |
1.34% |
0.88% |
||||
Non-performing assets to loans held for investment and OREO |
1.83 |
1.83 |
1.38 |
||||
Allowance for credit losses to loans held for investment |
0.96 |
0.98 |
0.94 |
||||
Allowance for credit losses to non-performing loans |
79.64 |
73.87 |
106.90 |
||||
Past-due loans to loans held for investment |
1.36 |
1.51 |
1.47 |
||||
Annualized net charge-offs to loans held for investment |
0.62 |
0.04 |
0.03 |
||||
Capital |
|||||||
Common shares outstanding |
8,251 |
8,251 |
8,199 |
||||
Preferred shares outstanding |
2,092 |
2,092 |
2,092 |
||||
Book value per share: |
|||||||
Common |
$ 6.43 |
$ 6.02 |
$ 5.76 |
||||
Combined common and preferred |
5.80 |
5.48 |
5.26 |
||||
Ratios (Bank only, estimated): |
|||||||
Tier 1 leverage ratio |
9.19% |
9.22% |
8.85% |
||||
Tier 1 risk-based capital ratio |
12.89 |
12.94 |
12.22 |
||||
Total risk-based capital ratio |
13.87 |
13.90 |
13.20 |
||||
Common equity tier 1 ratio |
12.89 |
12.94 |
12.22 |
||||
SOURCE Highlands Bankshares, Inc.
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